I’m often highly critical of Barnes & Noble. Part of the reason for that is due to the fact that because I love their hardware, I cringe when they make what appear to be stupid and short-sighted decisions. I also want at least one strong Amazon competitor. I don’t think Amazon having the vast majority of the e-book market is a good thing.

So a few months ago, when I saw Barnes & Noble had deeply discounted its Nooks in the UK, I cringed. Imagine my surprise when I read a recent Forbes blog post that seemed to show I had cringed prematurely.

I assumed the sale was a way to clear inventory, but apparently I was wrong. From the Forbes piece:

“It’s easy to say that this was a firesale of stock, but that would be the wrong lesson to draw from the change in strategy, as [Blackwell’s Digital Director, Matthew] Cashmore pushes on. ‘This was not about clearing stock – this was about putting as many eReaders into readers’ hands as possible so that people could see what a good eReader it was. The success of that has been demonstrated in continued exceptionally strong sales.'”

The article goes on to say that the strong sales are not just of e-readers but also of e-books.

And why did they choose Nook? “Blackwell’s chose the Nook because it was the best eReader,” according to the article.

OK, “best” is a relative term, and we could get into an endless discussion about whether the Nook really is the “best” e-reader, but I’m delighted that someone else recognizes the strength of the hardware. If B&N and Nook Media can continue to find good ways to get its devices into reader’s hands and continue to sell e-books, we’ll continue to have competition. Which means we’ll continue to see good devices and innovation in the industry.

(Hey, Paul St John Mackintosh: While you’re hanging around the book fairs, care to do some informal polling and see if the readers you’re talking to agree?)

Editor’s note: The following opinion piece, written by former Book Business editor-in-chief Brian Howard, originally appeared on the Book Business website back on June 26. The subject this piece covers is, by now, relatively old news. But it’s also a very well-written and smartly reasoned essay. And because this appears to have been the very last e-reading related bit of content produced by Brian before he left North American Publishing Co. for an editorial position with a different employer, we thought it only fitting to reproduce it here.

We’ll miss seeing you around the office, Brian. And we’ll certainly miss reading your always-intuitive takes on the digital publishing business. We wish you the very best of luck on your next editorial adventure. —DE

* * *

Admittedly, the recent Barnes & Noble news could have been much better. In some alternate reality, William Lynch could have gotten on that earnings call and announced that things were so smashingly good for the NOOK tablet business that Barnes & Noble was stepping up production and launching bigger (NOOK HD+ LANDSCAPE) and smaller (THE POCKET NOOK!) versions.

But in this reality, Lynch announced that competing with the likes of Amazon and Apple in the tabletsphere was just not working, and that while it would continue to manufacture its popular NOOK E Ink e-readers (Simple Touch and w/GlowLight) and to develop NOOK apps for other devices, B&N would cease manufacturing NOOK tablets and look for a third-party partner to license and manufacture co-branded NOOK tablets. (There are no partners lined up at present.)

The initial reaction from some outlets painted a picture of gloom, calling this the last chapter or the last stand, going so far as to suggest the end of all NOOK (despite the fact that the e-readers will continue to be developed in-house). This is what news outlets do when given a big story and no time to crunch it. Broad themes are easier than nuanced analysis.

What the stories from the business press like WSJ and Bloomberg are pointing out is that this is a potentially shewd move that will allow NOOK to focus on the channels through which it already sells the majority of its digital content, and shift some of its focus to apps (a.k.a. selling content on someone else‘s devices) and let some deep-pocketed device manufacturer incur the tablet production risk of continuing the NOOK tablet line which B&N has expended so many resources establishing.

Importantly, this move doesn’t smack of panic; it seems strategic and calculated. Will it be the move that frees B&N from a, ahem, noble but failed tablet venture and allows it to focus on its strengths of selling what is still quite a lot of content? The move that unbinds what have essentially become two (B&N, NOOK) separate companies linked only by common history? Or is it really just the next move in an endgame with which so many of us have become morbidly fascinated?

The latest in a long series of analyses of the Penguin Random House merger, the Apple price fixing verdict, and the difficulties of Barnes & Noble as all chapters in some great “Lord Of The Rings”-style epic struggle against the encroaching forces of darkness in the shape of Amazon, with its regiments of marching Kindles, comes, perhaps not surprisingly, from the pen of New York Times columnist David Carr.

“So far, what has been bad for the industry has not yet hit consumers directly. If they are among the many millions of people enthralled by CBS’s ‘Under the Dome,’ and decide to read the giant Stephen King novel that inspired it, they can hop on Amazon and buy it with a click for $13.99. Or they could avoid its door-stopping heft and spend just $7.99 for the Kindle version.”

God forbid: Publishers now may have to sell books more cheaply to a wider public using a distribution mechanism that brings considerable convenience benefits to the customer—and still reap their share of the rewards.

Back in FMCG 101, that used to be what was referred to as a “win/win can’t-lose” situation. But no: “while publishers revel in the robust margins provided by e-books—no manufacturing, no shipping and no remaindering—the growth of Amazon leaves them as secondary characters in a business they used to control.”

You’d wonder why an industry that can throw up the kind of scams typified by Author Solutions deserves any sympathy. But that doesn’t stop Carr. “After Borders called it quits two years ago this week, Barnes & Noble became the last big chain where publishers could get the exposure for their books that allows readers to discover them, and to sell all manner of books big and small that are still part of the foundation of the industry,” he avers.

True, it may be the last bricks-and-mortar walk-in chain where they can do that. But everyone with any skin in the publishing game these days, self-publishing or otherwise, knows that securing exposure and visibility is the number one priority nowadays, only it’s done online. And all manner of books great or small can be sold through Amazon, whether its print book storefront or Kindle editions. Amazon’s cardinal sin against the publishing industry is probably less that it cuts out the bookstore middleman than that it took a large slice of control of visibility out of the hands of publishers and handed it to customers by letting them see what was most popular.

Carr recklessly elides technological change and the decline of the bookstore with the publishing industry’s practices and the supposed offenses of Amazon. But all these parts do not add up. “Bookstores offer discoverability, not just the latest Dan Brown or Carl Hiaasen book on the front table, but sometimes treasures deep in the stacks, a long tail of midlist authors and specialty books,” he declares. “Even as the book business consolidates, the physical object displayed in an actual place will continue to be an important part of the ecosystem.”

That second sentence absolutely does not equate with the first. I can discover very much more on the Web, instantly, than I can in a bookstore. I presume Carr knows that too. Why doesn’t he say so?

Amazon’s supposed monopoly is a symptom of what the bookstores, and Barnes & Noble, got wrong. And publishers are most likely now to conspire full tilt with Amazon, or Apple, because they still refuse to do the one obvious thing, which is retail their own content directly without DRM. They’d far rather stay locked in to the biggest DRM game in town and All Your Search Belong to Az, and let the bookstores go to hell.

As it happens, I agree with Carr that B&N is good for Amazon. Like Apple once did for Microsoft, in a galaxy far far away and a $150 million investment in 1997, B&N can be Amazon’s fig leaf against accusations of monopoly. And despite articles like this, some officials might start to take the plaints of Carr and his ilk seriously.

Hue and cry, perhaps? Without an actual Nook, it’s difficult to read Nook books without the apps. Although there is a Nook for Web, lots of books are not viewable through it. My guess is that enough readers protested the loss of access to their books that B&N felt they had to respond by putting the apps back.

I’m not getting rid of my backup copy of the install files, however. Just to be safe.

German book press has picked up on the news that Barnes & Noble is still pressing on with its launch plans in Germany.

According to the original article, “Barnes & Noble still wants to expand to Germany this year,” this follows on the establishment of Barnes & Noble GmbH in Berlin and a statement by the U.S. book giant’s CEO that the company would be debuting in international markets from June 10th. June has come with no sign of B&N, the article points out, but company staffers are still heralding expansion into 10 international markets within the next six months.

The report singles out “price dumping” as the growth driver for B&N’s planned push, citing the €35 price point of the Nook Simple Touch in the UK after the latest price cuts. Others will find it very hard to match such prices, the article concludes, and adds that B&N’s launch delay in Germany was to give time to digest the results of its UK launch, the first step outside the U.S.

I’d be interested to see how important B&N’s German expansion is going to be to the German e-book market, though—rather than to B&N itself. Amazon.de currently offers the Kindle Paperwhite at €129 and the Kindle 4 discounted to €69, and according to Reuters, already makes more in Germany—albeit across all product lines—than it does in the UK. Kobo also operates its German bookstore. German booksellers have also clubbed together to launch their own Tolino e-reader (pictured at right), with 300,000 books offered on its integrated bookstore.

Even the supposedly predatory pricing of the Nook Simple Touch may not be enough to lure German readers away from competing platforms. (You can see a breakdown of e-book readers available in Germany here.) The German Publishers and Booksellers Association’s website libreka.de currently offers “2,066,111 books from over 1,825 publishers with over 50 million book pages available for purchase and 750,006 e-books available for search.”

Some argue, though, that the German e-book market is still only emerging, with plenty left to play for.

After three days of using it, my answer is a cautious “yes.” Because I still don’t have a tablet case for it, I haven’t run it through a typical work day. However, from my use in the house over the weekend, I can tell you that it’s got potential.

Let’s start with what it can and can’t do.

Loading apps from Google Play is a breeze. When you install the update, it adds a bunch of Google apps to your Apps Library, including Google Play. You can open Google Play and install any apps you’ve previously purchased or purchase new apps, and they will download and appear in your Apps Library.

If you’ve downloaded the Nook version of a Google Play app, it will try to download the Play version, if it’s updated from the Nook version. Sometimes it does it automatically. Sometimes it pops up in Notifications and you have to update it manually. I haven’t found a pattern yet. Paid apps from the Nook store have so far been unaffected by this.

Let’s be clear about what the update does. It adds Google Play. It does not allow you to add apps from other sources. From what I read on other blogs, apparently there has been some confusion about this. So no side-loaded apps from APKs, including side-loading the Amazon App Store. If you have purchased lots of apps from Amazon, you’re not going to be able to load them on the Nook HD.

Not every Play app is compatible with the HD. My biggest disappointment so far has been Swype. It’s not HD-compatible. I’m testing Swiftkey as an alternative, but I find Swype much more intuitive and accurate for swipe entry. Swiftkey is excellent for tap entry, so we’ll see. Right now the biggest impediment to replacing my Nexus 7 with the HD is data entry.

Other than those shortcomings, the HD with Google Play is a serious Android tablet contender. It has most of the apps and features you’d want, including Bluetooth. I’ve never been successful at getting my keyboard paired with my Nexus 7, but it works fine with the HD. That just might allow me to live without Swype.

The HD is lacking a camera and GPS. Location services work through Wi-Fi, however, so you will get some location-based application, if that’s important to you. I’ve never used the camera on either my Nexus 7 or my iPad, so the lack of a camera doesn’t bother me at all.

I do miss my widgets, but if that becomes a problem, I can always install an alternate launcher. So far, I’m managing fine without them.

I have one more minor gripe. The screen of the HD is gorgeous to look at (I can see the difference from the Nexus 7), but it’s not as slick. I think it has some sort of anti-glare coating (not that I’ve noticed that), and a finger doesn’t slide as well over it as on my iPad or Nexus 7. A stylus, however, works just fine, and I’ve been tending to grab my stylus before doing much other than reading on it. I expect I’ll get used to it over time.

My conclusion? If you’ve been using something like a Nexus 7, and you’re used to certain things (like a camera or side-loading apps), you may find the HD a bit limiting. If the HD is your first tablet, you’ll never realize you’re missing anything.

If you’re primarily looking for a tablet as an entertainment device, it’s hard to go wrong with the HD, especially at the current sale price. If you have work functions that requite side-loading, true GPS, or some other feature the HD is missing, it’s not for you.

That said, I think the HD would satisfy at least 90 percent of people looking for a good budget tablet. Google Play access gives it more functionality than the Kindle Fire, and it’s easier to customize the Carousel to get rid of stuff you don’t want to see.

Here’s one last image. It is pretty cool to see the Amazon Kindle app in the Nook app library…

If you have any questions or anything you’d like me to try, feel free to let me know in the comments below. I’m delighted to have new things to play with or try out.

All right! Barnes & Noble has finally listened to its customer base, and the tech bloggers. They recently announced that they’ll be rolling out a software update that adds the Google Play Store to the Nook HD and HD+ tablets.

This is excellent news. The Nook HD tablets have consistently received great hardware reviews, but the Nook App Store lags so far behind other app stores that there’s no point in drawing comparisons. Good hardware plus crappy app selection does not equal a winning combination.

I confess to being surprised by the news. While it’s what I’ve been writing about for a while now—encouraging them to open up their tablet line, that is—I didn’t really think they’d do it.

From what I’ve read, Nook apps will be distinguished by a small “n” in the corner of the app, while Google Play apps will have no distinction. Nook HD owners will also be able to buy movies, music and e-books from the Google Play Store, although non-Nook content won’t be accessible from native Nook apps. You’ll have to download third-party apps to play Google Play content. Considering the number of excellent third-party video and music players, that’s not a hardship.

And for those of you who are wondering, yes, you’ll be able to install the Kindle and Kobo apps on your Nook HD tablet.

Obviously, this is a good thing for consumers. But what about for Barnes & Noble? Will customers continue buying Nook apps and Nook books? I think they will.

* * *

I used to own a Nook Color. I really liked the stock reader, and I would have bought books from Barnes & Noble, even if I could have used the Kindle app without jumping through dual-boot-from-card hoops.

The average user doesn’t care about price shopping for e-books, especially since price parity among the various stores is still the norm. Consumers will buy where it’s easy, and the easiest way to buy new books will continue to be directly from the Nook. My hunch is that the typical Nook HD user will buy a few games or “must-have” apps from Google Play, but will still consume most of their content from Barnes & Noble.

Personally, this may not be good news for me. I’ve long admired the Nook HD tablet line. What stopped me from buying? The horrible Nook app selection. Now that I don’t have that excuse, gadget envy can take root. I love my Nexus 7, but we’ll see how long I can hold out!

Has anyone updated their Nook HD yet? If so, please let us know about your experiences by leaving a comment.

Contrary to a comment on a previous post, I do not have an axe to grind with Barnes & Noble. As I’ve said before, I want them to succeed because competition is good in the book space, especially the e-book space.

Therefore, I want to point out a good Barnes & Noble idea. Apparently every March for the last nine years, they have run a “Tournament of Books.” I saw a press release about it today and went to check it out.

Lots of companies run bracket-style competitions this time of year, often with a user voting element involved. B&N does theirs a bit differently. They have a judge comment on each book pair and select one as the winner. The judges let loose with their biases, commentary and ultimate decision. I read a couple of them, and they were interesting. I can’t say I agreed with all their reasoning, but they were fun to read. Following the judge’s decision is a “Match Commentary” by the Tournament Chairmen. Those were even more fun to read than the judges’ opinion. The Chairmen didn’t hesitate to take aim and fire when they thought it appropriate.

This is a good idea. It’s engaging and fun. It gives customers a reason to stop by the site regularly, and there’s a darned good reason to buy the books, both winners and losers. Who doesn’t want to see if their opinion about a book matches that of the judge or the chairmen?

However, I indicated in my headline that the implementation is awkward. What did I mean by that? The tournament ends on Friday, and they just sent out a press release today. They should have sent it a few days before the tournament began. Also, I’ve been a B&N customer for years, and this is the first I’ve heard about it.

So, good idea. But promoting it earlier and with more fanfare would turn it into a great idea.

Lots of rumors were flying last night about a split of Barnes & Noble. It’s now been confirmed through an SEC filing that Len Riggio, current CEO of B&N, wants to buy the retail stores and BN.com. Nook Media and the college bookstores will remain a separate entity under current corporate leadership; Riggio doesn’t want ’em.

I can’t imagine that this will end well. Many of the college bookstores are also retail stores (like the one at my son’s college, Virginia Commonwealth University). Will there be separate retail terms for each entity? If so, that would be horribly inefficient.

And how will Nook Media be sold if not from the BN.com website? Will there be two separate sites, one for physical books and one for e-books and apps? (Assuming, of course, that Nook devices even survive this move.) B&N already has an online presence that is inferior to that of Amazon. Two sites would only make it worse for consumers.

I’ve always championed Barnes & Noble as a competitor to Amazon. Not because I don’t like Amazon—I do—but because competition is good for me as a consumer. I don’t think this move is good for either competition or consumers.

Might be time to back up my Nook content. Nook may be going the way of Fictionwise soon.

My recent exploration of the failing of Barnes & Noble attracted many comments, some of which surprised me. To me, it was a simple issue of, ‘If you won’t sell to people, how can they buy?’ But I had some food for thought from some of our readers, and I think the problem merits some further exploration. Here are my top off-the-beaten-track Barnes & Noble Failure Conspiracy Theories.

Do some (or all) of them account for Barnes & Noble’s dismal sales?

1. Barnes & Noble is targeting takeover partners, not customers.

This one came to me via my Beloved, who reads … but makes his comments orally. His theory is this: In America, the dominant players are Amazon and Barnes & Noble, with a few in-roads by Kobo, Sony, etc., but nothing significant. What if Barnes & Noble was hoping to change that? What if they’ve decided to focus on their bricks-and-mortar stores? After all, while books may be a shrinking market, toys and educational products are not, and B&N (like Indigo here in Canada) are devoting increasing shelf space to it. Maybe they actually want to dump the online stuff, so they’ve decided not to sink any more money into it. They’re still selling, and perhaps making moderate gains in the UK.

In other words, their goal is not to dominate per se, but rather to keep it just attractive enough to be a desirable entity for takeover. They’re using EPUB already. Kobo could buy them out and instantly move to number two in the U.S. Or Sony, whose hardware dominance has slipped ever since the Kindle launched, could easily merge its own EPUB store with B&N, and have a new hardware line (with an exclusivity contract to Barnes & Noble to sell it), and suddenly be back in the game.

I agree with this, to an extent. These issues can be problematic for any vendor. But the thing is, others have worked around them. If Kobo can come from nowhere and establish a market share, and if Amazon can be third to the game and still be one of the top two players in Canada, why can’t Barnes & Noble? What are these other companies doing that B&N is not?

I do think the, ‘It’s somebody else’s fault’ argument does have some weight, but not all the weight. That is, there is something to it … but not everything.

As reader and commenter Felix Torres so eloquently pointed out: “Going international would bring in money that might make up for the losses at home but until they do something about the reason for those losses, they will continue to have the same problems.”

3. Barnes & Noble lacks an affiliate program on parwith Amazon.

Reader and commenter Bryan Paul Sullo makes the point that in the numerous blogs that review books, the ‘buy now’ link always leads back to Amazon, because they have an excellent affiliate program where bloggers can earn money for referring people to the Kindle store. That’s an excellent point, and one I hadn’t thought of. How many bloggers do you know who have ‘buy now’ links to other stores?

Kobo is doing just fine without an affiliate program because in most countries they service, they are just about the only game in town. America-centric Barnes & Noble, however, isn’t so lucky. They have the behemoth to contend with. I couldn’t say how many sales Amazon is sucking away from its competitors via affiliate links, but it’s definitely an interesting stat to ponder.

4. B&N isn’t offering a unique enough catalog.

This was an interesting one to me. Several commenters pointed out that the vast majority of purchased books are bestsellers, and you can get those everywhere. People may lament the closure of a bricks and mortar B&N store, but you can get Fifty Shades of Grey with your groceries, and that will be enough for many customers.

So, the value of a big store like B&N is what they can offer those who don’t want the best-sellers, and with the floor space their stores are offering these days to non-book merchandise, that value is shrinking.

Now, it could be that the online offerings are more robust. But that is the peril of linking yourself so strongly with a retail chain–if you’ve already lost relevance in the eyes of your potential customer because they come into your store and see a desert wasteland, how likely are they to go and look for you online? Instead, they just type the book into Google Search and get directed straight to a blog with an Amazon affiliate link…

* * *

So, the plot thickens. There’s a lot to think about here. What seems obvious to me is that some of B&N’s problems may not be fixable. But others may be. If they can focus on those, and maybe gain back some market share, there is hope for them yet … if they want there to be!

My esteemed editor, Dan, posed a question today, after processing B&N’s recent holiday sales stats: Why IS Barnes & Noble failing so badly? After reading their Christmas-season sales numbers, nobody can deny that their sales are not what they could be? Why?

With all due respect to Dan, who I think is a fabulous guy, I think the answer is a lot more straightforward than he might think. It’s not about sales metrics, or marketing techniques, or any complicated analysis I think he was seeking. The answer is simple: It’s because the world has more non-Americans than Americans, and Barnes & Noble has always been curiously hostile to the non-American.

I know that B&N, at last, launched a UK store last year. So, that’s … two countries they sell to now? Not to minimize the importance of my friends across the pond by any means, but that’s still a tiny fraction of the market. And it’s not just the e-books, either. They won’t even let you register a device with them—even if you swear not to try and buy books for it—unless you register an American credit card and an American address with them.

Think about that for a second. I, like many Canadians, live less than two hours from the U.S. border. The Beloved and I enjoy a little jaunt to Niagara Falls once in awhile. I think we went three times last year. And you know what? The folks on the American side were happy to see us. There was no pesky exchange rate to worry about; we have credit cards. And the Americans were more than pleased to accept them. We went out for breakfast. We bought T-shirts and shoes and video games. I bought a very nice cupcake at an adorable little shop on our way home. We had a grand ol’ time. And nobody ever suggested to us that we couldn’t wear the shoes again once we were back in Canada. Nobody ever told us we had to be American to eat the cupcakes…

Now, compare that to the Barnes & Noble experience. They are losing my business on two fronts. First, there is the loss leader issue—Amazon has all but admitted that it sells the Kindle pretty much at cost, because the company know that once you have one, you’ll want to buy books for it. Barnes & Noble has closed off that channel. Though even if I did want to live with that and side-load forever, I’d still find features locked out to me, because B&N won’t even let you run the machine unless you have that all-important U.S. (or UK) billing address.

And then they closed the Fictionwise store. My American sister had the option of transfering her books over to a Barnes & Noble account, and as a happy side effect, they even offered to convert them all to EPUB for her. She had some clunky PDB-format stuff that is now shiny new EPUB. And me—I’ve bought four times as many books as she has, and I get nothing but an email telling me to download and back up all my books by a certain date before I lose access to them forever.

And you’re wondering why they’re failing? Could it possibly be any clearer?

When I wrote a few weeks ago about looking ahead to 2013, I predicted that this is finally going to be the year the international e-book market matures to its full potential. I think B&N’s abysmal holiday sales numbers prove my point. The book market is already a threatened one. It’s competing with music, movies, apps, video games. People have more entertainment options than ever before, and a good chunk of it can be accessed from their phones, tablets and computers. The last thing a threatened market needs to be doing is turning away people with credit cards and itchy ‘buy now’ fingers.

I guess the one good thing about B&N’s reluctance to take my money is that I have more of it to spend with other vendors. Anyone want to recommend a nice brunch place in Buffalo that would be happy to sell a nice breakfast to two lovely Canucks and their credit cards?

To most readers, it probably seems unthinkable that Barnes & Noble and its Nook Media division might not be around at this time next year. But after B&N announced its embarrassingly low holiday season sales figures yesterday (scroll down to read the press release), that’s essentially what every media outlet covering the news seemed to be suggesting.

After thumbing through a few of the stories and considering the facts myself, I’ve got to say that my own personal faith in the company’s future isn’t exactly booming—quite the opposite, in fact.

If you’re not current on the story yourself, here’s the nut graf from a New York Times item about the news, which explains it succinctly:

“Retail sales from the company’s bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.” —Leslie Kaufman

With the above in mind, here’s my prediction:

At some point in 2013, B&N will either steer its business in a relatively new direction (focusing primarily on the education market, for instance), in which case they’ll manage to stay financially afloat, or…

B&N and the Nook unit will continue battling with the other digital Seven Sisters for marketplace dominance, in which case they’ll lose to Amazon and/or Google, one of whom will probably scoop them up for a song.

But here’s what I still can’t quite put my finger on: Why? Why exactly is B&N in the spot they’re in? What did they wrong? Or maybe: What are they still doing wrong?

I’ve heard all the standard explanations: Their digital ecosystem is too limited; the website isn’t easy enough to navigate; the customer service is poor, and so on. (Interestingly enough, you don’t often hear e-reading enthusiasts suggesting that Nook tablets are of poor quality. In fact, they’re generally praised for their open systems.)

At any rate, we’re genuinely curious to know what our readers think about the B&N situation, so here are our questions:

¶ What do you think B&N and the Nook unit need to do—or what do you think they need to do differently—in order to save the company from what seems to be an almost inevitable downward slide to the bottom of the heap?

¶ What major mistakes, if any, do you think B&N and/or the Nook unit have made over the past few years that have led the company to its current position?

The Retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, had revenues of $1.2 billion, decreasing 10.9% over the prior year. This decrease was attributable to an 8.2% decline in comparable store sales, store closures and lower online sales. Core comparable store sales, which exclude sales of NOOK products, decreased 3.1% as compared to the prior year due to lower bookstore traffic. Sales of NOOK products in the Retail segment declined during the holiday period due to lower unit volume and average selling prices.

While Retail sales of NOOK products fell short of the company’s expectations, bookstore sales of core products exceeded the company’s expectations, and therefore, the company continues to expect fiscal year 2013 Retail comparable bookstore sales to decline on a percentage basis in the low- to mid-single digits.

The NOOK segment, which consists of the company’s digital business (including Readers, digital content and accessories), had revenues of $311 million for the nine-week holiday period, decreasing 12.6% as compared to a year ago. Digital content sales increased 13.1%, while NOOK device unit sales declined during the holiday period as compared to the prior year. Digital content sales are defined to include digital books, digital newsstand, and the apps business.

"We entered the holiday with two great new products, NOOK HD and NOOK HD+, both highly rated media tablets of phenomenal quality," said William Lynch, Chief Executive Officer of Barnes & Noble, Inc. "NOOK device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday. We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward."

As a result of the NOOK sales shortfall, the company now expects fiscal year 2013 NOOK Media revenues of approximately $3 billion, and NOOK segment EBITDA losses at a comparable level to fiscal year 2012.

The Company has made significant investments over the past three years building the valuable NOOK digital retailing platform, which has resulted in millions of digital customers buying content from Barnes & Noble. The company’s digital strategy will continue to center around delivering the best digital reading, shopping and content experience in the market, while also being diligent about calibrating expenses to business trends in order to scale the business to profitability over time.

Barnes & Noble, Inc. will report second quarter results on or about February 19, 2013.

Whether it will ever be great again or not, Barnes & Noble seems to be trying to survive by imitating Amazon. An article on Time explains that B&N is adding more shopping categories to its bn.com website, including Home and Gift, Consumer Electronics, Arts and Crafts, Toys and Games, and Baby. The items in these new categories will mostly be provided by third-party vendors, with B&N taking a sales commission on each item it sells.

This seems to be an example of playing to one’s strengths—thanks to Nook e-book sales, the bn.com website seems to be one of few bright spots in Barnes & Noble’s portfolios. Sales at its brick and mortar stores have been declining over the last few years.

Time points out the irony that, at the time chain stores like Barnes & Noble and Borders were founded, they were expected to drive smaller independent stores out of business—but in an era of big box bookstores’ decline and failure, the independent stores that have survived are mostly doing well, because they know and can cater to their marketing niches.

Steve Riggio has stepped down from the CEO position of Barnes & Noble to become B&N’s Vice Chairman. The new CEO will be William Lynch. In addition to serving as President of the Barnes & Noble website, bn.com, Lynch has an impressive amount of e-commerce experience with HSN.com and Gifts.com (which he co-founded), as well as a lot of involvement with e-commerce and websites for Palm.